5 ways to tidy your finances before you’re gone

Estimated reading time
 5 min

Learn all about

• Paying off your debts before you’re gone
• Divvying up your super on your terms
• Talking to your beneficiaries and executor

When you pass away you might leave behind some pretty great things – the inner-city apartment you rent out, your family’s decade-spanning silverware collection, or your savings.

But you could also leave your loved ones scratching their heads as they try to figure out your finances.

Tidying up your finances now can help those important to you make the transition to a life without you. And it has the added bonus of reducing paperwork down the track.

Here are five things you can consider doing to get your finances in order before you’re gone:

1. Pay off as much debt as possible now

While your family is unlikely to inherit any outstanding debts, creditors (people who are owed the outstanding debts) are entitled to claim payment from your estate.

Depending on your financial situation, your executor (the person carrying out the instructions in your will) might pay off debt using your remaining assets. If that happens, there are three possible scenarios:

• Your estate is solvent – you have enough money in the estate to pay off any debts.
• Your estate is insolvent – there’s not enough money in your estate, so your executor might sell some of your assets to repay the debts.
• Your estate is insolvent but there’s not enough money to pay outstanding debts even after your assets have been sold. If this happens, any remaining debts may be cleared.

What can you do now?

Choose a debt management strategy that works for you. You can start with the smallest debt and work your way up (the snowball strategy) or tackle the largest one first (the avalanche strategy).

  Hot tip:

There are other simple things you can do to ensure your finances are tidy before you pass, such as managing your debt and budgeting. Check out some handy tips on all these topics and more to get your finances in tip-top shape before you’re gone.

2. Check your super

Your super might be one of the largest assets you have, but it’s not automatically included in your will. So who gets your super when you’re gone? Well, that depends on your binding death benefit nomination.

A binding death benefit nomination gives your superannuation fund instructions on how you want your death benefits, such as life insurance and your remaining super, to be distributed when you pass away.

What can you do now?

Check who you’ve nominated to receive your super when you pass and update it if you need to. While you’re at it, it’s also worth double-checking what type of life insurance you have as it’s often bundled with your super.

3. Talk to your executor and beneficiaries

Your executor is responsible for making sure your end-of-life wishes are fulfilled which is why it’s important you talk to them about your financial situation. Together you can make a plan that’s as stress-free as possible. For example, you can show them where your will is stored, make sure they know what your funeral plans are and how you’ve decided to pay for the costs involved.

It’s also smart to talk to your beneficiaries – the people you nominate in your will to receive your assets. Get them in a safe space and talk through your will. Explain why you made certain decisions so everyone is on the same page. This can help to reduce the likelihood of conflict later on.

What can you do now?

Come up with a plan of attack. Do you want all your beneficiaries in one room to talk through your will together? Or would you prefer to speak with them individually? Having a plan can help you feel prepared and in control of the conversation, which can also help your loved ones feel aligned with your wishes.

4. Store important documents in a safe spot

Whether it’s a physical safe in your closet or a password-protected folder online, storing important documents can help your executor feel confident in their role. This extra step can ensure your executor has exactly what they need to cover any end-of-life costs and arrangements and ensure your estate is properly handled.

For instance, having an inventory of everything you own, vehicle registrations and house deeds can make the transition process smoother for everyone.

What can you do now?

Don’t underestimate the time and effort needed to collect and store all your important documents before you pass away. That’s what’s known as planning fallacy. Set aside ample time to go through your documents and store them together.

5. Consider a power of attorney

Our capacity to make financial decisions might reduce as we get older. If you’re concerned about your future decision-making abilities, consider putting in place a power of attorney.

A power of attorney is a legal document that appoints someone to make financial or personal decisions on your behalf when you’re no longer able to make them yourself. You can decide how much power your power of attorney can have. For example, you might grant authority only for certain assets or decisions. And you can choose when the power of attorney becomes active. That could be immediately, from a specific date, after a certain event, or when you’re deemed incapable of making decisions yourself.

The person you nominate won’t be able to change your will – that’s something you’ll have to do – but they can help you make the right financial decisions before you pass.

What can you do now?

Talk to your friends and family about the possibility of having a power of attorney and what that might look like. Consider consulting a legal expert to give you guidance on the best approach for your situation and future.